Fed Cuts Interest Rates Again

As most economists predicted, the Federal Reserve Board has cut interest rates by a quarter of a point to 4 1/2 percent.

The FRB was concerned about the “housing correction” spreading into the greater economy, according to their statement:

Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.

Federal Open Market Committee Statement [FRB]

Comments

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  1. wezelboy says:

    I sure hope those mint workers are getting overtime pay.

  2. phelander says:

    Time to look into the “Glow Stick” futures with all the extra money I’ll be having now.

  3. Bladefist says:

    there goes my money market rate…

  4. darkened says:

    So much for the joy of canadian dollar parity, next yen parity?

  5. Amelie says:

    I guess my upcoming trip to Europe will be done a bit more frugally. Things will cost 25% more than they did two years ago.

  6. SOhp101 says:

    Woo hoo! Increase the money supply so the value of the dollar drops even further! Who cares that we’re trillions in debt and adding over 500 billion to that every year?

    Who cares about saving; the dollar will be worth nothing at this rate. Spend spend spend, before the bills in your wallet are worth less than the toilet paper in your bathroom!

    Re: article
    Energy prices are only going up because the dollar is weak; the cost of euros per barrel has remained virtually stagnant in comparison.

    Our government subsidizes Ethanol (a poorer form of energy on so many levels) which is probably the smartest way to drive up corn prices and then indirectly increase the cost of all meat and produce all over North/South America. Who suffers the most from increasing food prices?

  7. greatgoogly says:

    yup, between the falling dollar and increasing fuel costs the middle class will be welcomed into poverty in 3…..2……1…… The US as we know it is circling the drain… Oh well, it was a nice 60 years…..

  8. FLConsumer says:

    Now how soon before the online savings acct banks start dropping their rates?

  9. warf0x0r says:

    I don’t understand why they’re lowering interest rates. Doesn’t that release more money into the market which just can increase inflation? Plus we already have a weak dollar…

    Any Economists out there that can comment on this?

  10. catnapped says:

    @greatgoogly: Bleh–the fed considers the middle class obsolete and irrelevant at this point. It’s all about protecting the wealth at the top now (at least until they make their exodus to Dubai)

  11. catnapped says:

    @warf0x0r: Gotta keep all those banks and other wealthy chumps who went all in on RE from taking a bath. What you say? Can’t afford to eat or fill your car up, or you’re being tossed out into the street? Sucks to be you!

  12. supra606 says:

    I think I’ve figured out what these people are trying to do. They like playing Monopoly so much that they decided to create a real life version! Seriously why are they trying to make our dollars into rubles?!?

  13. catcherintheeye says:

    Nothing like putting off the inevitable for a little bit longer…I hope some of you bought Euro futures and sold Yen ones!

  14. s_silvers says:

    Way to go, Fed! Kick those of us who save our money, don’t buy houses we cant afford, and aren’t a slave to credit card debt right in the arse.

    New CD rates, going down.

    Oil prices, going up.

    What a dollar buys both domestically and internationally, going down.

    Someone please explain to me in plain English why the fed thinks that it is a good idea right now to keep lowering the interest rates?

  15. catcherintheeye says:

    @warf0x0r: The idea is that by lowering interest rates, it increases the flow of money in the economy, and thus makes money “cheaper” – the result being that business will be encouraged to invest, and will encourage households to spend (as they are able to purchase things more cheaply, and no longer receving as high of returns on their risk-free or low-risk investments). Banks also become more willing to lend to businesses and households. Also, stocks increase in value, increasing value not only in businesses but as well as households.

    Usually, lower interest rates are intended to stimulate the economy. You are right in assuming that this does lead to inflation, however, this is not the only factor. That being said, the Fed must balance the concerns of a weakening economy with that of concerns regarding inflation.

    You are also right in saying that the dollar is already weak. Many people complain (as this does cause problems – higher foreign prices, higher travel costs, higher cost of living) but a weakened dollar does have benefits – increased US exports, more tourism, and attractive US capital markets.

    Granted, this is all economic theory – personally, I’m inclined to say that the rate decrease is kind of throwing in the towel…recession isn’t necessarily a bad thing, and I’m concerned that by putting it off, we’re simply setting ourselves up for a really big recession, as opposed to a couple small ones.

  16. catcherintheeye says:

    @catcherintheeye: when I say “risk free” I mean T-bills, and “low-risk” I mean money markets.

  17. BigNutty says:

    Everything seems to be all thought out like a chess player 10 moves ahead in his mind. Assuming future results from actions taken today seems like gambling to me.

  18. SOhp101 says:

    @BigNutty: You’re gonna have to save up a whole lotta money for retirement then. Investment isn’t gambling if you know what to look for.

    Long term > short term, always.

  19. catnapped says:

    @catcherintheeye: Oh don’t worry–they’re just going to prop things up for another 13 months or so then let the whole thing come crashing down (just in time for someone else to have to clean up the mess)

  20. Major-General says:

    @warf0x0r: Ahh, remember that that the head of the International Monetary Fund a couple weeks ago said the dollar and the pound are too strong, but the Euro was just right.

    So, there’s a professional economist.

  21. charmaniac says:

    Yay, us savers are penalized again. Thanks fed! Its ok though, in the long run the American Dollar will still be the standard currency across the world. Our 13.4 trillion dollar economy is still larger than the next 4 countries combined. Japan 4.9 trillion, Germany 3.0 trillion, China 2.6 trillion, and UK 2.4 trillion.

    Not to say we will always be on top, but we have a lot of positives going for us. We have the best secondary education system in the world. We have one of the most if not the most productive work force in the world. Most importantly, we have a can do attitude that the rest of the world STILL looks up to. Bush has done plenty of damage, but we are strong enough as a nation to get through these times.

  22. AndyMan1 says:

    Should I just convert my money into pounds or euros and quit while I’m ahead? I figure if turn $1,000 into 500 pounds, and the currency halves again i’ll have $2,000, doubling my investment! I can’t lose!

    kidding of course…but not by much :)

  23. punkfishass says:

    @catcherintheeye: Benefits are not going to be felt for a long time since we import more than we export. all this will do is further weaken the price of the currency and increase the cost of our imported goods which is pretty much everything we consume.